Deciding On A Startup To Invest In
This article is written by Brian Malika, a Contributor Author at Startup Istanbul.
Tim Draper is the founding partner of Draper Associates and DFJ. He has made a number of investments including Skype, Hotmail, Tesla, Baidu, Indiegogo and AngelList among many others. He is also the founder of Draper University, in which real experts from different fields in order to teach the students rather than teachers. He is the creator of viral marketing, a marketing method for spreading a software application from customer to customer. Tim was a guest speaker during Startup Istanbul 2017, he delivered a speech where he talked about choosing the right startup to invest in.
The Harvard Business school reports that more than 50% of startups die after their fifth birthday! This implies that 1 in 2 start-ups will not be past tense after half a decade.
The above literature review is not good news to almost every investor because it simply means a loss for their money. And am here to help you the investor navigate the critical process of evaluating which start-up you should fund. Of course through a partnership.
why should I invest in this start-up?
As an investor, be rest assured that you will meet tens to even hundreds of promising founders out there. All of them presenting to you impressive ideas that could make the world a better place. And not only do these entrepreneurs spoil your options but also the need to get value for your money intensifies.
So what is the magic to fall for the right one?
The magic to falling for the right start-up is observing the interesting uniqueness in the start-ups in front of you.
Yes, just imagine being in a business partnership for the next forty-five years! That's two and a half decades of frequent meetings analyzing market data, graphs, competitors and such stuff.
If a start-up doesn’t interest you to the point of igniting a fire in your spirit then be rest assured a long-term investment with that entity will be painful, discouraging, overwhelming, costly and you can name any other negative outcomes.
The rule of the game here is that, make sure you prioritize a start-up that excites your emotions and which you would be willing to partner with even if the investment money doesn’t make sense.
3 Types of Startup Founders to look out for while considering investment
(1.) Great Start-up Founders
(2.) Bold Start-up Founders
(3.) Real Start-up Founders
(1.) Great Startup Founders
These are the start-up founders who are easily noticeable from the crowd of start-up pitching. This is because they have mastered the art of marketing their work with all the details at hand.
However, most of the time they are just experts in the ideation process or the issue they are presenting.
And as such, they are noted for lacking the practical market experience. Implications here are that Great-start-up founders end up successfully receiving investment capitals and lack on the implementation stage.
As a keen investor, make sure you inquire on how an exceptionally talented start-up founder will implement the ideas once funded. Question every stage of their implementation first.
(2.) Bold Startup Founders
Now, these are the start-up founders who plainly tell you that they are here to make money and make lots of it! Or even to win your attention, bold start-up founders might mention to you that they want to help you as an investor make money.
Trust me you need to be extra cautious while trading with such start-up founders because in most cases when they usually back off too fast when faced with tough market challenges that require a little patience in order to harvest the much-awaited returns.
Also, Bold Start-up entrepreneurs, in most cases are not concerned about the human-centric aspect of doing business. All that matters to them is to make more and more money even at the expense of ventures that pose a health risk to the public.
(3.) Real Startup Founders
Imagine engaging a start-up founder that tells your face as an investor that if you don’t invest in them they don’t care! And in fact, they go further to tell you that their success will be all over media a few years down the line whether you invest in them or not!
What do you think would be your reaction as an investor? Would you say they are Rude?
No, such start-up founders that utter words of intense passion about their ideas are not rude. They are simply focussed on results and sure of their goal. Just that they haven't figured the right partner to invest in their venture.
As an investor If you afford the patience and honors of extending your engagement with real start-u founders, then you will learn that such founders have well-planned ideas with complete timelines for outcomes and all their assumptions tested.
So, as an investor out there, make sure you are patient and ready to listen to every founder that makes a pitch to you. Be a focused student and you will invest your fortune in the right start-up.